Accounting for Software Costs

Organizations must correctly account for the costs associated with the acquisition and development of software for internal use. The American Institute of Certified Public Accountants' Statement of Position (SOP) 98-1 requires organizations to capitalize or expense various costs associated with obtaining and developing internally used software. Management should become familiar with SOP 98-1 and other applicable accounting standards and discuss specific capitalization and expense issues with its accountants.

 

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